Income Tax Appellate Tribunal - Hyderabad
Sri Gyan Kumar Agarwal (Ind), ... vs Assessee on 4 June, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ' B ', HYDERABAD
BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND
SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
IT(SS)A No.22/H/2008
Block Period of Assessment 1997-98 to 2002-03 &
for the period from 1.4.2002 to 21.1.2003
Shri Gyankumar Agarwal Vs The ACIT, Circle 6,
(Ind.), Hyderabad Hyderabad
(PAN ABGPA 5780 L)
(Appellant) (Respondent)
Appellant by: Shri Syed Jameeludin
Respondent by: Smt. K. Kamakshi
ORDER
Per Chandra Poojari, Accountant Member:
This appeal preferred by the assessee is directed against the order passed by the CIT(A) -I, Hyderabad dated 4.6.2008 and pertains to the Block Period of Assessment 1997-98 to 2002-03 & for the period from 1.4.2002 to 21.1.2003.
2. The assessee raised the following (revised) grounds in its appeal:
1. The order of the CIT(A) in confirming the addition of Rs.2,55,50,000/- as undisclosed negative peak credit, only on the basis of an unidentified note book, is opposed to law and is against the facts, circumstances and probabilities of the case.
2. During the course of assessment proceedings, as per records, mutual understanding was arrived at to refer the unidentified diary to the Govt. Examiner, whose decision will be accepted in good spirit to avoid protracted litigation. But it has not been honoured by the department.
3. In the month of June, 2007 the Income Tax Inspector attached to the assessing officer visited the residence of the 2 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= assessee and collected the handwriting samples of eleven members of the family as per the requirement of the Govt.
Examiner, which is on record. The assessing officer has not mentioned anything about the report of the GEQD which is a crucial piece of evidence, as it goes to the very root of the matter in deciding the owner of the diary.
4. The assessee filed affidavits of the three persons viz., S/Shri Jai Prakash, Mohan Bhai and Mohan Gupta, whose names were mentioned by the assessing officer in the assessment order. But the assessing officer neither examined them nor gave reasons for not examining them.
5. This is the second time for the assessee to come before the Tribunal on the same issue, as the assessing officer failed to carry out the directions of ITAT, Hyderabad, in their order in IT(SS)A No.151/H/2005 dated 28.2.2006, to allow the assessee to examine or cross examine certain persons, whose statements may be relevant for the purpose of determining the issue.
6. The addition of Rs.2,55,50,000/- made by the assessing officer, purely on the basis of unidentified diary without bringing on record any evidence by any corroborative material is not only erroneous in law but is highly unjustified. Such an unidentified seized document, found in cellar, alone is not sufficient to draw definite conclusion that it belongs to the assessee and its contents are true.
7. Natural justice demands that the assessing officer should have made comprehensive enquiries before making a huge addition of Rs.2,55,50,000/- which he failed to do so. The assessing officer himself admitted that no enquiries were made vide his letter dated 25.10.2007, Therefore, the addition of Rs.2,55,50,000/- is not only baseless but is against the principles of natural justice and is erroneous in law.
8. The observation of CIT(A) in para 3.4 at page 7, that the submissions of the assessee does not highlight how the seized document would have been planted in the cellar, is wrong.
9. The orders of the assessing officer and the CIT(A) are not in conformity with the directions of the Tribunal and are, therefore, liable to be quashed.
3. Brief facts of the case are that the assessee is an individual who is a Director of M/s Ambika Food Industries Ltd. He is one of the major share holders of M/s Jivika 3 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= Leasing & Finance Co. Ltd., and also having interest in the firm M/s Ambika Farms. There was a search and seizure operations u/s 132 of the IT Act conducted in the residential premises of the assessee at D.No.8-2-681/A/6, Road No.12, Banjara Hills, Hyderabad on 21.1.2003. During the course of search operations various evidence were found in the form of loose sheets, diaries, books of account, documents and the same were seized. Consequent to the search and seizure operations, a notice u/s 158BC dated 7.5.2003 was issued calling for the return of income for the block period. In response to the notice, the assessee filed return of income for the block period on 22.12.2003 admitting undisclosed income of Rs.7,29,750/- on account of the following :
a) Unexplained investment in jewellery Rs.2,66,045
b) Unaccounted cash Rs.2,38,700
c) Unexplained investment in the shares of M/s Jeevika Leasing and Finance Co. Ltd. Rs.2,25,000
---------------
TOTAL Rs.7,29,745
==========
4. The case was the subject to scrutiny by assessing officer. Thereafter, block assessment u/s 158BC r.w.s.
143(3) was framed. The assessing officer passed the original assessment order on 31.1.2005 wherein he determined the income of the assessee as follows:
1. Unexplained jewellery (as admitted) Rs.2,66,045
2. Unaccounted cash(as admitted) Rs.2,38,700
3. Unexplained investment in shares In M/s GVK Leasing Finance Co.
(as against Rs.2,25,000 admitted By the assessee ) Rs.14,42,000
4. Unexplained money lending Rs.2,55,50,000 TOTAL Rs.2,94,96,745/-
4 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) =========================
5. Against this the assessee carried on the appeal to the CIT(A). The CIT(A) vide order dated 2.9.2005 (issued on 28.9.05) confirmed the order of the assessing officer. Against this the assessee came in appeal before this Tribunal. The Tribunal on first round vide its order dated 28.2.2006 set aside the issue to the file of assessing officer with the following directions:
9. We have heard both the parties and perused the record. There is no doubt that presumption u/s 132(4A) applies to a document found during a search and seizure operation from the premises of the party. However, such presumption is a rebuttable presumption. If the assessee wants to rebut this presumption by examining or cross examining certain persons, whose statements may be relevant for the purpose of determining the issue, we do not find any reason as to why an opportunity for the same should not be allowed to the assessee. However, the affidavits filed by the assessee along with the appeal papers cannot be considered as part of record of the Tribunal in the absence of an application under Rule 29 of the IT Appellate Rule 1962 and, therefore we do not express any opinion on the same. The department has also not shown that enquiries made by the assessing officer with reference to the diary has been confronted to the assessee. In this view of the matter, we are of the considered opinion that this issue requires to be set aside to the file of the assessing officer for disposal afresh in accordance with law.
10. As regards to the second addition, the facts and circumstances of the case are similar to that in the case of Shri Gyankumar Agarwal (HUF) dealt by us separately in IT(SS)A 139 of 2005. For the reasons mentioned therein, we confirm the addition of Rs.14,42,000/-.
6. On setting aside by the Tribunal as above, the assessing officer has passed the consequential assessment 5 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= order dated 20.12.2007, wherein the assessing officer repeated the same addition and determined the income as unexplained expenditure at Rs.2, 74,96,700/-. Against this, the assessee went in appeal before the CIT(A). The CIT(A) confirmed the order of the assessing officer vide order dated 4.6.2008. Against this the assessee went in appeal before the Tribunal. The Tribunal on the second round vide its order dated 7.11.2008 dismissed the appeal of the assessee by holding as follows:
5. We have considered the rival submissions on either side and perused the material available on record. The only grievance of the assessee is that the directions of this Tribunal contained in its order dated 28.2.2006 in IT(SS)A.151/H/2005 have not been complied with. We have carefully gone through the order of this Tribunal dated 28.2.2006. The Tribunal found that since the assessee is making allegations against the officers, it may be necessary to allow the assessee an opportunity to cross examine those officers whose statements may be relevant for deciding the issue. Accordingly, the assessing officer has provided an opportunity to the assessee to cross examine the officers, who participated in the in the search proceedings. Statements recorded from these persons were reproduced by the assessing officer in the assessment order. Therefore, it may not be correct to say that opportunity of cross examining the officers was not provided to the assessee, as per the directions of the Tribunal. Regarding the report of hand writing expert, the assessing officer in categorical terms stated in his letter dated 25.10.2007 referred to above, that no enquiry was made by him, except what was referred to in the assessment order. No mention was made in the assessment order about any reference to the handwriting expert. No material is available on record to suggest that any matter was referred to the handwriting expert. In the absence of any material in that behalf, we may not be able to say anything about any reference to the handwriting expert. In the circumstances, in our opinion, there is no violation of principles of natural justice. No arguments were advanced by either side on merits. Therefore we are not inclined to go into the merits of the addition.
6 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= 7.1 Against this, the assessee moved a Miscellaneous Application before this Tribunal MA. No.173/H2008. The Tribunal dismissed the MA filed by the assessee vide its order dated 26.12.2008 stating as follows:
5. Rival contentions were considered in the light of the material available on record. When the appeal was argued by the assessee, the only grievance is with regard to non compliance of the directions contained in the order of this Tribunal dated 28.2.2006 in IT(SS)A No.151/H/2005.
This Tribunal found that the assessing officer examined Inspector of IT and another official, and the statements recorded from them were reproduced in the assessment order. The assessee was also given opportunity to cross examine those officials. As for the reference to hand writing expert, the assessing officer by a letter dated 25.10.2007 clearly stated that there was no enquiry made beyond what was referred to in the assessment order. In the assessment order, there is no mention whatsoever to the reference to the handwriting expert. In the absence of any material, this Tribunal cannot go into the allegation of the assessee on presumption. Unless there is any concrete evidence to suggest that the department officials planted the diary as alleged by the assessee, this Tribunal has to proceed on the basis of presumption contained in S.132(4) of the Act.
6. Further, when the appeal was taken up for hearing, the assessee has not argued on merits. Mere filing of the written submissions do not tantamount to arguing the case. When opportunity is given to argue the case orally, it is for the assessee to point out the grievance, so that the other party can reply. Written submissions may be filed after completion of the arguments, in addition to the oral submission, but written submissions cannot be taken as substitute for oral submissions. Moreover, when the assessee argued the case orally, he cannot make any additions in the written submissions for the reason that the other side may not have 7 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= any opportunity to reply to the allegations made in the written submissions. Unless and until what is contained in the written submissions are brought to the notice of the Bench in the open court, the other side may not have any opportunity to reply to the allegations made in the written submissions. In these circumstances, the assessee may not have any grievance when the additional allegations made in the written submissions were not considered. In other words, either party needs to be given adequate opportunity to reply to the allegations made by the assessee. In the absence of any argument in the open court on the merits of the assessment, non consideration of the written submissions cannot be considered to be an error, especially when the revenue has no opportunity to meet the points raised in the written submissions. Therefore, in the opinion of this Tribunal, there is no error in the order of this Tribunal. By saying no, it is not the correctness of the order of this Tribunal is being justified. There may be other view possible in the matter. It is open for the assessee to approach the appellate forum, in case it is aggrieved by the view taken by this Tribunal, but on that count, it cannot be said that the order of the Tribunal suffers from any mistake, much less a prima facie one, in terms of S.254(2) of the Act.
7. In view of the above discussion, therefore the application of the assessee is devoid of merit. It is accordingly rejected.
7.2 Thereafter, the assessee not satisfied with the above order, filed one more Miscellaneous Application in MA No.122/H/2010. The Tribunal vide its order dated 29.10.2010 recalling the order of the Tribunal dated 7.11.2008 by holding as follows:
4. We have considered the rival submissions on either side and have also perused the material available on record. From the very beginning, the assessee claimed that the material found during the course of search operation does not relate to the assessee and it was not written either in the
8 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= hand of the assessee or any of his family member. Admittedly a reference was made to the hand- writing expert to find out the truth of the claim of the assessee that the material found at the time of search does not relate to him. In fact, the Assessing Officer received the report of the hand- writing expert. However, the Assessing Officer failed to consider the same, while completing the assessment. The contention of the learned Departmental Representative is that it is not necessary for the Assessing Officer to consider such a report when other material is available on record. We are unable to accept this contention of the learned Departmental Representative When the matter was referred to the hand-writing expert and the report of the handwriting expert was received by the Assessing Officer, which discloses that the material found during the course of search operation was not written by the assessee or his family members, in our considered opinion, it has to be considered by the assessing officer and he has to record his reasons for either rejecting or accepting such a report.
5. The assessing officer and the other appellate authorities under the Income-tax Act are quasi- judicial authorities. The proceedings before the assessing officer and the appellate authorities under the Act, including this Tribunal, are judicial in nature and therefore, whenever a material document was found and opinion of the expert was called for, it is the bounden duty of the Assessing Officer as well as the appellate authority to consider the same and record a categorical finding as to why the same was not acceptable. If such a finding was not recorded, in our opinion, people may lose confidence on the system. Powers of the Assessing Officer to adjudicate and compute the income flows not merely from the statutory provision but also from the confidence reposed by the public on the system. Once the public lose confidence, the entire system will fail. In this case, when the assessee right from day one claims that the material found during the course of search operation was not written in his hand or in the hand of any of the family members, the Assessing Officer referred the matter to the hand writing expert. Inspite of the fact that the hand writing expert submitted his report to the Assessing Officer, the Assessing Officer failed to consider the 9 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= same in the assessment proceedings. Moreover, the very fact of reference having been made to the hand-writing expert was not brought to the notice of the Bench of this Tribunal, when the appeal of the assessee was heard. Therefore, in our opinion, there was a miscarriage of the justice due to non- consideration of the report of the hand-writing expert. After considering the report of the hand- writing expert, the authorities concerned may accept or reject the opinion of the hand-writing expert in that report. Authorities under the Income-tax Act are not bound by the opinion expressed by the hand-writing expert. However, the authorities are bound to consider the same and record their findings/reasons for accepting or not accepting the same. Non-consideration of the report of the hand-writing expert though it was available before the Assessing Officer, would go to the root of the matter.
6. Furthermore, it is well settled position of law that all judicial/quasi-judicial/executive authorities have inherent power to recall an order passed by them, in case the order was found to have been obtained by suppression of any material fact/misrepresentation/- fraud. In this case, even though the Department could have brought to the notice of the Bench of this Tribunal during the course of hearing of the appeal, about the report of the hand-writing expert, it failed to do so. However, the report of hand writing expert came to light, when the Assessing Officer himself admits in the order passed under S.154 of the Act. In our opinion, this failure on the part of the Department to bring to the notice of the Bench about the existence of the report of the hand-writing expert, goes to the root of the matter. Therefore, as held by the Apex Court in the case of Honda Siel Power Products (Supra), non-consideration of the report of the hand-writing expert would amount to an error within the meaning of S.254(2) of the Act. Since the consideration of the matter requires fresh adjudication in the light of the report of the hand-writing expert, in our opinion, the order of the Tribunal dated 7th November, 2008 in IT(SS)A No22/Hyd/2008 is liable to be recalled.
7. In the light of the above discussion, in the interests of justice and by following the judgment of the Apex Court in the case of Honda Siel Power 10 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= Products Ltd. (Supra), we recall the order dated 7.11.208 and accordingly, the appeal of the assessee, being IT(SS)A No.22/Hyd/2008 now stands restored on the file of this Tribunal. Registry is directed to post the appeal for final disposal before the regular Bench on 13.12.2010. The copy fo this order shall be treated as notice of hearing. Therefore, there is no need for the Registry to issue any separate notice of hearing.
8. In the result, Miscellaneous Application of the assessee is allowed.
8. Since the Tribunal recalled its earlier order dated 7.11.2008 as above, this appeal came up for adjudication before us on 19.1.2011.
9. The learned authorised representative for the assessee submitted that the assessee Mr. Gyan Kumar Agarwal, is the Managing Director of M/s Jivika Leasing & Finance Co. Ltd. and also the Director of M/s Ambika Food Industries (P) Ltd. The assessee along with his wife was out of Hyderabad from 15.1.2003 on a trip to his in law's place at Hubli and Goa, and return to Hyderabad only at 9 am on 22.1.2003. Search & Seizure operation u/s 132 was conducted on 21.1.2003 in the residential premises of the assessee. The assessee's younger brother Mr. Sunil Kumar Agarwal was examined by the search party and statement was recorded by him by the search party on 21.1.03 at 9.30 am. Again the recording of statement was resumed at 3.25 am on 22.1.03. The only issue arising for consideration in this appeal relates to an addition of Rs.2,55,50,000/- under the head unexplained investment in money lending. In his statement, the search party put question about 2 Note books found together in one polythene bag numbered as A/GAR/4, which contained 31 pages and the 2nd Note Book as A/GAR/5, which had 21 11 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= written pages both were found in the cellar of the house. The assessing officer made the addition solely on the basis of one unidentified Note Book, which suddenly sprang up from unknown place and found and seized in the cellar of house long after the commencement of the search when the assessee was not in city. Mr. Sunil Kumar Agarwal replied stating that the Note book does not belong to them and he did not know in whose hand writing it was written and that the book was neither recovered in his presence nor in the presence of his family members and he did not know the contents of the book. No pronotes or receipts were found by the search party in any premises. The parties who were examined by the DDI also denied having indulged in any money lending transactions with the assessee. Some hand loans were given by account payee cheques were recorded in the regular books of account. Simply because, the names of some persons viz., Raj Kumar, Jai Prakash and Mohan Bai were included in the cash flow statement and such names were found in 'alleged diary' it cannot be held that the diary belongs to the assessee. The assessee categorically denied that he had any dealings with the persons whose names are noted in the note book seized in cellar. Some of the names of persons in assessee's family and friends circle may be similar to the personal names in the seized diary. But as the family surnames are not noted in the seized record, it is absolutely unrealistic to link those names in the seized records with the names in the assessee family. There is no reason why such diary should be in the corner of cellar that too at 2 pm and not earlier when the search party went around every part of the house many times right from the commencement of search. A letter disowning this diary was 12 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= also filed by Mr. Sunil Kumar Agarwal, the younger brother of the assessee on 30.1.03 before the Directorate.
9.1. Further, he submitted that the assessee apprehends that somebody might have planted them to harass the assessee. The condition of these two note books being new is a very important aspect which would prove that these are fabricated by some one probably with an intention to involve the assessee. The books alleged to belong to the assessee which he himself does not know, are found somewhere in the corner of the cellar. The entire situation looks very suspicious. The assessee was rather surprised that one person as witness brought by the department to the residence in the morning hours for the search who was from first day morning 8 am to the next day morning. This person who signed the Panchanama in his name has also signed as Shri Amarnath impersonating his father's name who was not there at the time of search. The assessee's brother took the objection and then the department thought it is better to get some other persons as witness, and them called one of the drivers of the department and took his signature on the Panchanama and also on the seized diaries at 3 am late night. The driver was not present at the time of search. There is every possibility that one of the enemies could have mischievously fabricated the books and dropped these books in the cellar to harass the assessee. The dept. should have sent the books to handwriting Experts. The assessee strongly believes that the person who had some idea of the assessee's business and assets could have written entries in these books on guess work.
13 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= 9.2. He submitted that it is clear from the facts, that the entries made in the diary are imaginary, concocted and unrealistic transactions which do not at all relate to the assessee. The assessee affirmed that the diary does not belong to him. The so called diary looks absolutely new, therefore it is of 2003 origin. The entries for earlier years contained therein are of fabrication and it does not belong to the assessee. The signatures of the witnesses are also not genuinely made because one witness viz., Rajender Kumar Gupta signed for himself and also impersonated his father Shri Amarnath by signing father's name. To cover-up this wrongful act, the officer of the search party called the Taxi driver at 3.30 am and made him signed as a third witness. Another peculiar feature of the pocket note book is that the same name appears at different pages with different transactions.
9.3. According to learned AR the diary A/GAR/5 contains only incoherent entries which would not be written by any businessman. The Diary alleged by the department to belong to the assessee contains loans for more than 2 crores. If it is such an important personal record, it should be in the personal custody of the assessee constantly but would never be thrown in a corner near the compound wall at 2 PM. This itself is a proof that it does not belong to the assessee. The assessee was on tour to Hubli from 15.1.03 and return to Hyderabad only on 22.1.03 morning at 9 am. The assessee's statement was recorded on 4.2.2003 in which the assessee denied the ownership of the diary. The assessee was informed that the diary was found along with another note book A/GAR/4 in a polythene bag. The other book also contained noting regarding properties belonging to 14 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= the assessee's family with absolutely wrong years of purchase. This has now been entirely discarded by assessing officer as not at all useful. This book was stated by the assessee as not belonging to him or his family. Similarly this alleged seized material marked as A/GAR/5 does not belong to the assessee at all and should be discarded for purposes of assessment. All the facts were brought to the notice of the department vide assessee letter dated 30.1.2003, immediately after search and also in letter dated 17.3.2003. If the names which appear in the diary are of existing persons then they should be examined to find out the genuineness of the transactions. This has not been done. Therefore this diary A/GAR/5 also to be discarded.
9.4. He submitted that the presumption envisages u/s 132(4A) applies only when the books of accounts, other documents, money, jewellery or other valuable articles or things in the course of search are found in the possession of the person named in the warrant of search. In this case, the two note books were not found in the bed room of Mr. Gyan Kumar. Therefore, the presumption u/s 132(4A) will not be applicable in regard to the note books said to have been found by search party near the compound wall of the residential house. There is no allegation by the search party that the diary is thrown out by inmates of the assessee's residence. In view of this circumstantial evidence and the factual position, the ownership of the diary cannot be attributed to the assessee. When the assessee was not in station, although in the warrant of search name of the assessee was mentioned, in his absence search was conducted. The presumption envisaged u/s 132(4A) applies only to accounts, other documents, money, jewellery or 15 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= other valuable articles or things in the course of search are found. The presumption u/s 132(4A) is in respect of the persons in whose possession or control the books or the documents are found. The use of the words 'to such person' in the said section means the person in whose possession the books of accounts or document are found. Clause (ii) of section 132(4A) provides that the contents of such books of accounts or documents are true. This presumption can be applied only against the person in whose possession the books of accounts or the documents are found. Therefore, had Mr. Gyan Kumar Agarwal present at the time of search and the above two diaries, along with any promissory notes or receipts, were found in his bed room or almirah, the assessing officer may presume that these diaries found in assessee's possession were correct. However, while utilizing these diaries in the case of any other person (the person present before search party other than Mr. Gyan Kumar Agarwal) there cannot be any presumption about the correctness of such diaries. Therefore the presumption u/s 132(4A) is applicable only against the person in whose possession these diaries were found and not against any other person. The diary does not bear the name of the assessee or any other member of his family. The diaries were not in the handwriting of any family members nor any employee of the assessee. The finding of the assessing officer in making addition of Rs.2,55,50,000 on the basis of jottings in the diary are neither legally sustainable nor factually maintainable because the assessing officer had failed to consider relevant factual and legal aspects properly and making enquiry about the names noted in the diary and examine them while considering the evidentiary of the value of diary. The assessing officer is carried away by suspicion 16 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= and has made huge addition on suspicion. The assessee was not in conscious possession, knowledge or control of the said note books which the search party alleged to have been found in the cellar at about 2pm. These note books were not in the handwriting of any of the members of the family or any accountant or any employee of the business of the family group. These two seized note books were recovered in the cellar near the compound wall. This location showed that the assessee was not in conscious possession of the said two small note books. There is no proof that the assessee was knowingly in possession of these two note books. The knowledge involved in the possession of unauthorized note book has to be proved. The word possession in such cases, connotes possession with knowledge, and knowledge is an essential ingredient. Under these circumstances, the provisions and presumption u/s 132(4A) do not at all apply to the assessee case.
9.5. He submitted that the two note books were found together in one polythene bag and seized material bearing No.A/AGR/4, was discarded by the assessing officer even though it contained some reference to purchase of properties. The assessing officer is not justified in placing any reliance on the note book marked as No.A/AGR/5. The assessee affirms that both the books are fabricated and are to be discarded.
9.6. He submitted that in the first round of appeal before this Tribunal, the matter came up before this Tribunal in IT(SS)A.151/H/2005. It was reiterated the submissions made before the assessing officer and CIT(A) before the Tribunal. Existence of evidence is must for money lending 17 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= business. No other incriminating material or documents were found during the course of search. Therefore, the Tribunal by its order dated 28.2.06 set aside the issue to the file of assessing officer with a direction to provide opportunity to examine the persons whose statements are necessary to rebut the presumption u/s 132(4A) and thereafter, decide the issue afresh in accordance with law. Pursuant to the directions of the Tribunal, which is binding on the assessing officer, the assessing officer vide his letter dated 22.6.2006, allowed an opportunity to present the case on 3.7.2006 for completion of set aside assessment.
9.7. He submitted that the assessee filed his reply on 28.6.2006 before the assessing officer , wherein he requested the assessing officer to afford an opportunity:
a) To examine the search party officials
b) To supply a copy of the enquiry made by the assessing officer in respect of three persons mentioned in the assessment order viz. Rajkumar Marwah, Jaiprakash Agarwal and D. Mohan Gupta.
c) Enquiry made by the assessing officer in regard to handwriting in the alleged note book
d) To examine the persons viz. Jitender, Mr. Rajkumar, Mr. Jaiprakash and Mr. Mohan Gupta who filed their affidavits before the assessing officer.
9.8. Therefore, it is binding on the assessing officer to follow the directions given by the Tribunal and only after making such further enquiries, as may be necessary and only thereafter, the assessing officer should have proceeded to make fresh assessment as directed by Tribunal.
18 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= 9.9. During the set aside assessment proceedings, the assessing officer expressed his inability to produce the 21 persons name in the note book for examination because the identity of the debtors is not reflected in the note book therefore, it was suggested that guidance of the Addl. CIT u/s 158G 1961 may be sought. Accordingly the authorised representative and the assessing officer represented before the Addl.CIT on 24.5.07, with the copy of the letter filed before the assessing officer. The Additional CIT again on 28.5.07 discussed the case in the presence of authorised representative and the assessing officer. As negotiated, understanding was reached on 28.5.07, and also agreed that the alleged note book should be sent to GEQD, for his opinion and came to decision that out of the above four items requested by the assessee, three should be foregone by the assessee, to resolve the issue for which the dept and the assessee agreed to accept the opinion of GEQD in good spirit to avoid protracted litigation. This fact was also recorded in the order sheet on 28.5.07. The Hon'ble Tribunal has to give finding on this fact and adjudicate. Accordingly the assessing officer vide letter dated 31.5.07, sent the handwriting samples of 11 persons of family members along with the seized note book to GEQD. The GEQD sent his opinion dt. 4.10.07 to the assessing officer very much before the limitation period 31.12.07. as follows:
The writings in the red enclosed portions marked Q1 to Q21 in the Note Book marked as A/GAR/5 were compared with the specimen writings of 11 persons which were marked as S1 to S146. An effective and thorough comparison of the questioned and specimen writings was carried out but it has not been possible to connect the authorship of the questioned writings marked Q1 to Q21 with the writings of the any of the 11 persons.
19 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) =========================
10. The ld. AR submitted that by that time, there was a change of incumbent. When the issue came before the new Addl. CIT for approval u/s 158BG, he refused to accept the opinion of GEQD. On learning from this fact from assessing officer, the assessee on 16.11.2007 wrote three letters to the assessing officer requesting the assessing officer to allow opportunity for cross examination. This request of the assessee was turned down by the assessing officer on the ground that the limitation was involved. The fact that the matter involved limitation could not be held against the assessee. It was the own lapse of the assessing officer. The assessing officer should have taken up the assessment well in time. Having not done so the assessing officer was not correct in drawing adverse inference against the assessee and for making the impugned addition. Action of the assessing officer violated the principles of natural justice.
Upon hearing from the Addl. CIT the assessing officer should not have reinstated his earlier order on the very same material by ignoring the direction given by the Hon'ble ITAT. He requested the Tribunal to give finding and adjudicate on this issue. But unfortunately GEQD report which should in fact become the basis of assessment has been totally ignored defeating the very purpose for which it was referred to for completion of set aside assessment. Fairness requires that the revenue should have respected its own file note as has been held by Hon'ble Madras High Court in the case of CIT vs. Surana Metals and Steels (I) Ltd. (300 ITR 324). While passing the assessment order in the course of the second round of assessment proceedings the assessing officer allowed examining only the search officials but not the other three issues contended by the assessee, which was against 20 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= natural justice and against the directions of this Hon'ble Tribunal.
10.1. The assessing officer allowed the assessee to cross examine Shri G. Krishna Rao the then ITI, who participated in the search proceedings. Cross examination and his reply is reproduced in the assessment order. He admitted that no other books/documents were found along with the note book. Point to be noted is the allegation of the department that the assessee is doing money lending business for which existence of evidence is must. Seized alleged note book alone was not sufficient to draw any definite conclusion regarding the existence of undisclosed income, and that it was not possible to draw any inference on the basis of this alleged note book without proper corroboration. It is further submitted that no addition should be made on the basis of surmises, conjectures and suspicion. Surmises and suspicion cannot take the place of proof in assessment proceedings.
10.2. He submitted that Mr. Mohan Kumar, who was the authorized officer of the search team, was allowed to cross examine by the assessing officer. The replies of the officer to the cross examination were reproduced in the assessment order at Pg.6 questions Nos.4,5,6,7,8,9 & 10 which are relevant for deciding the issue. In such an event, it is not known, as to why Shri Amarnath accepted to be a witness to the search and as to why he did not put forth his problems and expresses his inability to be a witness before the commencement of search. Had he stated these facts before commencement of the search, he would not have been taken as a witness to search. Mr. Amarnath has worked out a 21 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= plan and was quite successful in his plan. The authorized officer allowed him to move freely is quite clear from his statement. The assessee strongly believes that Shri Amarnath had implanted the alleged note book in the cellar, as it was impossible for him to do so in the main premises of the assessee, where all the person were present. So he had successfully chosen the cellar as proper place for him to do so and he successfully did it. Thus, the assessee has been correctly and factually rebutting the presumption u/s 132 (4A) rights from the beginning. Thus, the assessee has rebutted the presumption with cogent and proper evidence. Therefore, the onus lies on the department to prove that the note book belongs to the assessee and its contents are true and correct. This was the reason why the assessee had requested to examine the search officers.
10.3. He submitted that the assessee through a letter dated 16.11.2007 requested the assessing officer to afford an opportunity to examine the three panchas whose names and addresses were furnished in the panchanama on 21.1.2003 and reminder on 10.12.07. The panchas were S/Shri Amarnath (father), Rajender Kumar Gupta (son), Syed Jaffar (Driver of Qualis) engaged by the search party). All the parties signed the alleged seized note book. All the three persons were never present when the search party found and picked up this allege note book. How can the three panchas become witnesses for finding and picking up the alleged book which leads to show that it was not at all proved the exact place from where the note book was found?
10.4. He submitted that in the panchanama and on the said note book Rajendra Kumar has not only signed but Mr. 22 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= Rajendra Kumar Gupta has also signed as Amarnath impersonating his father's name who was not at all there at that time. The younger brother of the assessee noticed this therefore the department thought it is better to get some other person as witness and called one of the drivers of the department viz. Syed Jaffar and took his signature on the panchnama. Out of the above four issues, three were ignored as it is a long drawn out process, and therefore, the assessee has to readily agree to the negotiated suggestion of the department to refer the matter to the GEQD to resolve the issue. The assessing officer vide his letter dated 25.10.07 informed the assessee that no other enquiries was made by assessing officer than what was discussed in the assessment order.
10.5. He submitted that the affidavits filed by the four persons were on record before the assessing officer and the CIT(A). None of the authorities considered it necessary to cross examine the deponents with reference to the statement made in the affidavits. Consequently, the assessee is entitled to assume that the authorities were satisfied with the affidavits filed as sufficient proof on this point. In the second round of appeal before CIT(A) the assessee contended that assessing officer did not allow opportunity to examine the other three issues but only allowed to examine search officials which is against the directions of this Tribunal. The CIT(A) confirmed the assessment. In the second round of the appeal before this Tribunal, it was again reiterated what was submitted before the assessing officer and CIT(A). The Tribunal dismissed the appellant appeal in IT(SS)A No.22/H/08 dated 7.11.2008 stating that no mention was made in the assessment order about any reference to the 23 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= handwriting expert and no material is available on record to suggest that any matter was referred to handwriting expert, therefore, there was no violation of principles of natural justice and thereby dismissed the appeal. Thereafter, the assessee filed MA before the Tribunal in MA No.173/H/2008 on the ground, that in fact, a reference was made to the handwriting expert and the handwriting expert had also filed his opinion before the assessing officer. At this stage, the dept. did not come forward to admit that the matter was referred to handwriting expert, and therefore, the Tribunal rejected the MA vide order dated 26.12.08. Thereafter the assessee filed an application u/s 154 of the IT Act, before the assessing officer. The assessing officer order u/s 154 dated 25.2.09 admitted that the matter was referred to the handwriting expert along with samples of handwriting taken from 11 nos. of the family of assessee and the opinion was also received by the assessing officer much before passing of the set aside assessment. In spite of these admitted fact that the assessing officer failed to consider the same in assessment proceedings.
10.6. He submitted that the decision of the Tribunal should be read as a whole and it is not permissible to accept part of the directions and ignore the rest of the directions and placed reliance on the judgement in the case of Glass Lines Equipments Co. Ltd. Vs. CIT 253 ITR 454(Guj.) As the department, having referred the matter to the GEQD, ignoring the three requirements of the assessee, as was agreed to by both the parties such a report is binding on both the parties. The dept cannot blow hot and cold. Actually the suggestion came from the dept. to refer the matter to the GEQD to avoid protracted litigation and to 24 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= resolve the issue. Therefore, either the dept should stick to the other three requirements of the assessee when the report of GEQD is not taken for consideration take the entire three requirements of the assessee into account or ignore the three requirements by accepting the report of GEQD.
10.7. He submitted that as has been held by the Hon'ble Rajasthan High Court in the case of CIT vs. S.C. Sethi (295 ITR 351), that the assessing officer has not really made efforts to give effect to the directions of CIT(A) for making available opportunity to cross examining by the assessee and the affidavits remains ignored.
10.8 He submitted that the assessee has fully rebutted the presumption u/s 132(4A). This fact is also proved y the report of the GEQD. Department could not produce the persons concerned for cross examination and miserably failed to prove that the alleged note book belongs to the assessee without corroborative evidence. No businessman would indulge in advancing or taking cash loans without any corresponding surety for the recovery of such loans. This factor has not been taken into consideration by the dept. before coming to the conclusion that the note book belongs to the assessee. Injustice has been done in this case twice. There should not be any further innings. Under the above circumstances of the case, justice should be done based on the fundamental principle that justice is above all. Even the law bends before justice.
10.9. According to learned AR there has been a gross breach of the principles of natural justice because adequate opportunity to meet the case made out was not given to the 25 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= assessee. The block assessment order is liable to be quashed.
11. The authorised representative for the assessee has also relied on the following judgements:
1. Mehta Parikh & Co. Vs. CIT (Bom.) (S.C) (1956) 30 ITR 189
2. Glass lines Equipments Co. Ltd. Vs. CIT (Guj.) (253 ITR 459) (Guj.)
3. CIT Vs. Hon'ble S.C. Sethi (Raj. HC) 295 ITR 354
4. Umacharan Shaw and Brothers Vs CIT (WB) (S.C) 37 ITR 277
5. Sona Builders Vs. Union of India (S.C) 251 ITR 199
6. ACIT Vs. Saurashtra Kutch Stock Exchange Ltd. (S.C) 305 ITR 241
7. CIT Vs. Surana Metals & Steels (I) Ltd. (300 ITR 327)
8. Jaya S. Shetty Vs. ACIT (AT) (Mum) 69 ITD 372
9. T.S. Kumaraswamy Vs ACIT (AT) 65 ITD 189
10. ACIT Vs. Om Prakash & Co. (Mum) 87 TTJ 183
11. D.r. RML Mehrothra Vs. DCIT (Allahabad ) 68 ITD 305
12. Brijlal Roopchand Vs. ITO (40 TTJ 668 (Indore)
13. Raj Pal Singh Ram Autar Vs. ITO (39 TTJ) (Del.) 544
14.Ashwani Kumar Vs. ITO 39 ITD 183 (Del.)
12. The learned DR relied on the order of the lower authorities.
13. We have heard both the parties and perused the materials available on record. The main grievance of the assessee in this appeal is with regard to sustaining of 26 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= addition at Rs.2,55,50,000/- which is on the basis of seized materials noted as A/GAR/5. According to the assessing officer these documents contains details of money lending business of the assessee as follows:
ANALYSIS OF ENTRIES IN THE DIARY Date Name Receipt Payment Day Balance 12.1.2000 Rajuseth - 35 lakhs -35 lakhs 16.1.2000 Rajkumar 0 10 lakhs -45 lakhs 15.3.2000 Shyambai 0 5 lakhs -50 lakhsw 25.3.2000 Rajuseth 4 lakhs 0 -46 lakhs 30.3.2000 Arvindbai 0 8 lakhs - 54 lakhs 15.4.2000 Arvindbai 0 7 lakhs -61 lakhs 15.5.2000 Shyambhai 0 8 lakhs -69 lakhs 25.5.2000 Rajuseth - 5 lakhs -74 lakhs 24.6.2000 Rajkumar 5 lakhs 0 -69 lakhs 26.6.2000 Rajkumar 10 lakhs 0 -68 lakhs 25.7.2000 Rajkumar 0 4 lakhs -72 lakhs 20.8.2000 Shyambai 10 lakhs 0 -62 lakhs 20.8.2000 Shyambai 15 lakhs 0 -60.5 lakhs 20.10.2000 Rajkumar 0 5 lakhs -65.5 lakhs 2.1.01 Ashok 0 6 lakhs -68.5 lakhs 25.1.01 Ashok 0 4 lakhs -72.5 lakhs 10.2.01 Rajkumar 9 lakhs 0 -63.5 lakhs 2.3.01 Rajkumar 0 2 lakhs -65.5 lakhs
27 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= 3.3.01 Pradeep 0 10 lakhs -75.5 lakhs 5.3.01 Naresh 0 9 lakhs -84.5 lakhs 20.3.01 Mohanbai 0 15 lakhs -99.5 lakhs 10.4.01 Arvindbai 0 5 lakhs -109.5 lakhs 5.5.01 Jaiprakash 0 5 lakhs -114.5 lakhs 17.5.01 Rajkumar 5 lakhs 0 109.5 lakhs 25.5.01 Rajkumar 2 lakhs 0 107.5 lakhs 10.6.01 Ombai 0 10 lakhs -117.5 lakhs 10.6.01 Arvindbai 3 lakhs 0 -114.5 lakhs 15.6.01 Shyam 0 5 lakhs -119.5 lakhs 1.7.01 Shyam 0 2 lakhs -121.5 lakhs 10.7.01 Pradeep 5 lakhs 0 -116.5 lakhs 15.7.01 Rajkumar 0 5 lakhs -121.5 lakhs 20.7.01 Gopalbai 0 10 lakhs -131.5 lakhs 10.8.01 Naresh 5 lakhs 0 -126.5 lakhs 18.8.01 Shyambai 0 10 lakhs -136.5 lakhs 10.10.01 Naresh 0 4 lakhs -140.5 lakhs 15.10.01 Pradeep 3 lakhs 0 -137.5 lakhs 18.10.01 Mohanbai 0 5 lakhs -142.5 lakhs 25.10.01 Naresh 1 lakhs 0 -141.5 lakhs 1.11.01 Pradeep 1 lakhs 0 -140.5 lakhs 10.12.01 Ashok 5 lakhs 0 -135.5 lakhs 12.12.01 Pradeep 0 6 lakhs -141.5 lakhs 28 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= 15.12.01 Jaiprakash 1 lakhs 0 -138.5 lakhs 15.12.01 Ashok 2 lakhs 0 -139.5 lakhs 30.12.01 Jaiprakash 1 lakhs 0 -142.5 lakhs 2.1.02 Jaiprakash 0 5 lakhs -148.5 lakhs 10.1.02 Ramesh - 9 lakhs -151.5 lakhs 10.1.02 Bhagwandas 0 8 lakhs -159.5 lakhs 2.2.02 Maheshji 0 5 lakhs -164.5 lakhs 4.2.02 Kishorebai 0 15 lakhs -179.5 lakhs 10.2.02 Shyambai 5 lakhs 0 -174.5 lakhs 2.3.02 Mohanbai 2 lakhs 0 -172.5 lakhs 2.3.02 Satish 0 10 lakhs -182.5 Rajuseth lakhs 3.3.02 Gopalbai 0 5 lakhs -187.5 lakhs 10.3.02 Shyambai 0 5 lakhs -192.5 lakhs 15.3.02 Mohan bai 0 10 lakhs -202.5 30.3.02 Ombai 2 lakhs 0 -200.5 25.4.02 Ashok 0 5 lakhs -205.5 27.4.02 Bhagwandas 0 7 lakhs -212.5 6.5.02 Naresh 0 5 lakhs -217.5 8.5.02 Mahesh 0 10 lakhs -227.5 23.5.02 Pradeep 0 5 lakhs -232.5 Rajuseth 15.6.02 Ramesh 1 lakh 0 -231.5 16.6.02 Shyam 0 8 lakhs -239.5 20.6.02 Maheshji 0 5 lakhs -244.5 23.7.02 Bhagavandas 1 lakh 0 -248.5 20.8.02 Rajuseth 0 6 lakh -249.5 23.8.02 Abhisekh 0 5 lakh 254.5 25.8.02 Mohanbai 2 lakh 0 252.5 20.9.02 Bhagawandas 5 lakh 0 247.5
25.l0.02 Gopalbai 2 lakh 0 245.5 9.11.02 Rajuseth 0 5 lakh 250.5 15.12.02 Abhisekh 0 5 lakh 255.5 15.10.02 Shyam 2 lakh 0 253.5 29 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= lakhs
14. We have also carefully gone through these documents and also the seized materials on the basis of which the addition was made. These seized materials were found at 2 PM on 21.1.2003 in the corner of the cellar of the assessee's house. The assessee submitted before the lower authorities that it does not belong to him. The search was commenced at 8.30 am on 21.1.2003 and the note book/loose slips marked A/GAR/5 were found out only at 2 PM on 21.1.2003. When it was confronted to the assessee's brother Mr. Sunil Agarwal while recording the statement on oath from him at 3.25 PM on 21.1.2003, he submitted that the documents do not belong to them at all. He also stated that he cannot identify the handwriting. He also stated that the seized material was not recovered in his presence or his family members. He categorically stated that he does not know the content of the book. However, the lower authorities drew inference from these documents that the assessee has been carrying on the money lending business and the presumption that these documents belong to the assessee as it was found in the assessee's premises. It is also fact that there was also search and seizure operation in the case of Prem Chand Gupta, cousin of Shri Gyan Kumar u/s 132. During the course of search and seizure, certain documents were found and the seized documents contain credit card and bank documents which indicate the name of Shri Divesh Kumar Agarwal, s/o Shri Gyan Kumar Agarwal and the statement recorded from Divesh Kumar Agarwal u/s 131 reads as follows:
Q.8: I am showing you annexure APG7 in which the papers are numbered 1 to 24 seized from 30 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= residence of PC Agarwal, 8-2-681, Road No.12, Banjara Hills , Hyderabad on 21.1.2003 At this premises, simultaneous search and seizure operations were carried on along with your residential premises, which is just by the side of your premises. Are you aware that search and seizure operations took place in the premises of PC Agarwal on 21.1.2003 simultaneously along with search and seizure operations in your residential premises?
Ans. On that day at 11 am only, I came to know that seach and seizure operations are being conducted in the residential premises of PC Agarwal, because I was busy with the IT Officials who were carrying on search and seizure operations in my premises.
As far as the papers containing in annexure A/PG/7 stated to have been seized from the premises of PC Agarwal, my reply is as under:
The slips of papers serially numbered 8,9,10,11,12,13,14,15,16,17,18, 19,20 and 21 containing in the annexure belong to me.
Q.9. Can you explain how these papers found their way into the premises of PC Agarwal, your neighbour, and were identified by the department and made as annexure in the case of Sri PC Agarwal during the search?
Ans.: Soon after the IT Officials, entered our residential premises, my wife, Smt. Anshu Agarwal woke me up from sleep and I was in mental shock and in that hurry what were the papers available with me, I have thrown through my window in to the premises of Shri PC Agarwal, who happened to be our relative and neighbour. As I mentioned, the papers stated above belong to me and reflect certain business transactions or other matters pertaining to myself and my family members".
15. From the above, the department drew inference that the documents were thrown from assessee's premises to the premises of Mr. Prem Chand Gupta. It is also fact that on the basis of information gathered from these seized materials, the assessment was framed. There was also 31 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= information which revealed the bank account indicating the names of the assessee and it was also found that Shri DV Agarwal admitted transaction through bank credit cards seized from the premises of Shri Prem Chand Gupta as his undisclosed income. From the act and conduct of the assessee and their family members, the revenue authority drew conclusion that they intend to conceal vital evidence which threw light on their undisclosed income to the Department. As such, they relied on the seized material marked as A/GAR/5 to determine the undisclosed money lending business and income which was reflected in the seized document marked as A/GAR/5. Since Shri G.K. Agarwal is the head of the family, looking after the business and family interests, the money lending business is considered in the hands of Shri G.K. Agarwal, the present assessee. The only contention of the assessee regarding the seized material A/GAR/5 is that these materials were planted by his business competitors in his premises and he sought for cross examination of the witnesses and the officers involved in the search action from the Department.
Acceding to the request of the assessee, the Tribunal vide its order dated 28.2.2006 given an opportunity to the assessee to cross examine the parties. Accordingly the assessee cross examined one of the inspectors of the Department viz., Shri G. Krishna Rao and the details are as follows:
Q. Soon after commencement of the search at 8.20 am did any official of search party take rounds of the premises including the cellar, if so what was the time?
Ans: after entering the premises, all the family members were called to the main hall of the entry floor and the door of the stair case which leads to the cellar was locked 32 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= by confirming that there was no one present in the cellar. Children who were sleeping in upper floor bed rooms were also called to the main hall and we have locked all the independent bed rooms at around 9 am and all the keys were kept with the search team. The bed rooms of the upper floors and the cellar were locked from outside without making any rounds into them. After completion of the physical search of all the living rooms of the main members of the family, the other places which were locked were searched one by one in the presence of one of the family members.
1. Did you find any partition walls in the cellar or is it open without any hindrance?
Ans: To the best of my remembrance, there were no partition walls in the cellar. Only the pillars of the building were there.
2. Did you not find the polythene bag containing two note books when you first took the possession of the cellar?
Ans: At the time of locking the cellar door, it is not possible to ascertain whether any bag is available on the floor of the cellar as the location of the bag is not visible from the first level where we have locked the cellar entrance. Though we have locked the cellar entrance at 8.20 am, we have entered the cellar only at 3 pm.
3. As stated above, by you that search officials called you to take physical search of the cellar, what did you find in cellar by physical search? Please name the documents found.
Ans: In the cellar, besides the polythene bag referred above, some household articles were there. No other books/documents were found.
33 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) =========================
4. How many panchas attended your search operation Ans: I do not remember.
16. The assessee has also cross examined the authorized officer Mr. Mohan Kumar and the contents of cross examination which reads as follows:
Q.6: The witness Mr. Syed Jaffer appeared to be driver of vehicle engaged by your search team. How can a driver be present at the material time? Was he aware of the search proceedings conducted by your team?
Ans: I do not recollect the vocation of Mr. Syed Jaffer. As far as I know there is no legal bar in having a driver as a witness. This witness was present throughout the course of the search. He was aware of the search being conducted by the IT Deptt. Consisting of myself and my team in the above premises.
7. It appeared that Mr. Syed Jaffer was a Driver of a private taxi car and he was all through sitting in the car outside the gate of the premises. How can he be expected to witness the search proceedings and finding of two note books numbered A/GAR/4 & A/GAR/5?
Ans: I deny that Mr. S. Jaffer was not in the premises during the course of search.
Regarding the seizure of the above mentioned two note books, it is not necessary and possible to seize each and every document in the presence of both the witnesses. The said documents can also be seized in the presence of other two witness mentioned.
17. At this stage we are not able to consider the argument of the assessee's counsel regarding the planting of seized 34 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= documents by his business rivals since there is no concrete evidence to suggest the placing of the seized material by third party. It is also fact that assessee has not at all taken any step as per law against the issue relating to planting of documents. Further, the contention of the assessee's counsel is that the department has not given an opportunity to cross examine the witnesses. The assessee is also having grievance regarding not considering the representation filed by the assessee on various occasions.
18. But the issue before us now remains is that whether the seized material A/GAR/05 can be the basis for addition of Rs.2,55,50,000/- As seen from the above seized materials, these are just hand written loose documents. The Department got verified the handwriting of the seized material A/GAR/05 from the Govt. Examiner of Questioned Documents, Directorate of Forensic Science, Govt. of India who had given report that on comparison of the questioned documents and specimen writings of the assessee and his family members the authorship of the questioned document does not tally with the seized material A/GAR/05. But this report of the handwriting experts is not binding on the Department. It is only circumstantial evidence. There is no necessity to the Department to prove the authorship of this document. The other plea of the assessee is that the documents are planted one and it cannot be relied for the purpose of assessment. Though the assessee refused that the documents are not belong to him, the burden is cast upon the assessee to prove conclusively that it does not belong to the assessee. There is no presumption in law that the assessing officer is supposed to discharge tax liability by direct evidence only and thereupon the undisclosed income 35 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= beyond doubt. The undisclosed income of the assessee is to be computed by the assessing officer on the basis of available record. In many a time, it is very important to have direct evidence or conclusive evidence to prove to determine the undisclosed income. When the assessee gives an evasive reply to the assessing officer, he has no choice but to take estimation of the income. The only thing is it should be reasonable on the basis of material available on record. It should not be based on conjunctures and surmises. As of now material considered by the assessing officer for making the addition is only the seized material marked as A/GAR/05 which is a notebook containing the details of day to day ledger account of various persons to whom the money was advanced. In view of this, we have to consider the seized material A/GAR/05 to see whether it is enough to make addition. In our opinion, this document is only note book/loose slips. We have to look into the statement recorded u/s 132(4) or 132(4A) of the IT Act. The seized material A/GAR/05 found during the course of search and the statement recorded is some piece of evidence to make an addition. The assessing officer has to establish the link between the seized material A/GAR/05 and with other books of accounts of the assessee. It cannot be considered alone as conclusive evidence. The word 'may be presumed' appear in section 132(4A) gives an option to the authorities concerned to presume the things. But it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee has every right to rebut the same by producing the same in support of his claim. The entire case depends on the rule of evidence. The assessee has every right to shift the burden of proof. There is no conclusive presumption. In the present case, the 36 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= assessee as well as the assessee's son and also assessee's brother Shri S.K. Agarwal categorically stated in every stage of examination and statement recorded u/s 132(1) or 132 that the seized material A/GAR/05 is not at all belonged to them. In spite of this the assessing officer proceeded to conclude that these seized materials are conclusively belonged to the assessee. Leave alone the issue relating to authorship of the document seized and the findings of the GEQD, the Department should find out and establish the nexus of these seized materials to the assessee's business while concluding block assessment The assessing officer shall be specific about the nature of nexus of the seized material to the business of the assessee. The allegation of the Department is the seized material that reflected money lending business of the assessee. But they are not able to unearth any background with regard to the money lending business like loan agreement, promissory notes, security details, bank account receipts vouchers or any other corroborative evidence. Without any of these, the department has taken a view that the assessee is carrying on the money lending business. More so, there are so many names of the persons whose addresses are not at all traceable. The department not traced and examined any of them. There is no information from any party that they have taken loan from the assessee. There is no evidence as to whether they repaid the loans towards the principal amount and interest. The department cannot draw inference on the basis of suspicion, conjuncture and surmise. Suspicion, however strong cannot take place of material in support of the findings of the assessing officer. The assessing officer should act in a judicial manner, proceed with judicial spirit and should come to a judicial conclusion. The assessing 37 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= officer is required to act fairly as a reasonable person and not arbitrarily and capriciously. Assessment made should have adequate material and it should stand on its own legs. The assessing officer without examining any party, who has taken the loan from the assessee, cannot come to the conclusion that the assessee lends money. The basis for addition is only note book/loose slips. These note book/loose slips are unsigned documents. The assessing officer has not established nexus between the note book/loose slips and business of the assessee. There is no narration regarding the address of the parties, the exact amount of loan, period of advance, rate of interest and instalments due. Also there is no evidence for repayment of money towards the loan. There is no valid seized material to come to the conclusion that the assessee has actually made an advance of that amount i.e. Rs.2,55,50,000/- . The note book/loose slips marked A/GAR/05 found during the course of search is a dumb document having no evidentiary value, no addition can be made in the absence of corroborative material. If there is circumstantial evidence in the form of promissory notes, loan agreement and address of the parties or bank entries, the addition is to be made on that basis to the extent of material available. The assessee is not expected to explain the loose papers found as there is no evidence other than note book/loose slips carrying on money lending business of the assessee. The assessing officer has failed to prove the money lending business carried on by the assessee on the basis of seized material A/GAR/05. In our opinion, no addition can be made on the basis of dumb documents/note book/loose slips in the absence of any other material to show that the assessee has carried on money lending business. Noting on the note 38 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= book/diary/loose sheets are required to be supported/ corroborated by other evidence and are also include the statement of a person who admittedly is a party to the noting and statement from all the persons whose names there on the note book/loose slips and their statements to be recorded and then such statement undoubtedly should be confronted to the assessee and he has to be allowed to cross examine the parties. In the present case, undoubtedly no statement from the parties whose names found in the note book/loose slips has been recorded and assessee such there is no question of cross examination of them and entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search is not possible. The evidence on record is not sufficient to support the revenue's case that huge money lending business has been carried on by the assessee outside the business of the assessee. This is the block assessment and we are concerned only with the undisclosed income and we have to consider only material and evidence detected as a result of search. It means that if an examination of the material already on record before search or if as a result of some external information or some other sources other than a search, it is found that some income had escaped assessment and then it is open for the Assessing Officer to resort to a regular assessment including reopening of a completed assessment if so advised. But he cannot drag these items into the block assessment proceedings envisaged under Chapter XIV-B of the I.T. Act. In our opinion evidence available with the Assessing Officer as a result of search is to be used for the purpose of determining the undisclosed income of the block period. The evidence, if any, relied on by the Assessing Officer for the 39 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) ========================= purpose of determining the undisclosed income of the block assessment is to be put before the assessee for his comments before completing assessment. More so, if the Assessing Officer wants to rely on the statement of any third party the same is required to be furnished to the assessee and if the assessee wants to cross examine any of the parties whose statement was relied on by the Assessing Officer the same is to be provided to the assessee. In the present case the assessee is having grievance for not providing the opportunity of cross examining the parties whose statements were relied on by the Assessing Officer while completing the assessment. The circumstances surrounding the case are not strong enough to justify the rejection of assessee's plea asking the opportunity of cross examination. In view of this, we set aside the block assessment order and remand back the matter to the file of the assessing officer. We direct the Assessing Officer to give an opportunity of cross examination of the parties as required by the assessee and thereafter if there is any sufficient evidence other than the unsubstantiated note book/loose slips marked as document A/GAR/5 or if this document (viz., A/GAR/05) substantiated by any other evidence to establish that the assessee is having undisclosed income, then the Assessing Officer shall complete the assessment in accordance with law determining the undisclosed income covering this block period in addition to the other undisclosed income uncontested before us. It is needless to say that the evidence to be considered by the assessing officer for this block assessment is all the evidence on record found as result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence.
40 IT(SS)A.22/H/2008 Shri Gyan Kumar Agarwal (Ind.) =========================
19. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 18.2.2010
Sd/- sd/-
G.C. GUPTA CHANDRA POOJARI
VICE PRESIDENT ACCOUNTANT MEMBER
Dated the 18th February, 2010
Copy forwarded to:
1. C/o Syed Jameeluddin (IT Consultant), 16-7-302, Erram Cottage. Azampura, Hyderabad-24
2. The ACIT, Central Circle-6, Hyderabad
3. CIT(A)-I, Hyderabad.
4. CIT, Hyderabad
5. The D.R., ITAT, Hyderabad.
Np